COURT OF APPEAL FOR ONTARIO
CITATION: Essar Steel Algoma Inc. (Re), 2016 ONCA 274
DATE: 20160415
DOCKET: M46326 (M46297)
Gillese J.A. (In Chambers)
IN THE MATTER OF THE COMPANIES’ CREDITORS
ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR
ARRANGEMENT OF ESSAR STEEL ALGOMA INC.,
ESSAR TECH ALGOMA INC., ESSAR STEEL ALGOMA
(ALBERTA) ULC, CANNELTON IRON ORE COMPANY
AND ESSAR STEEL ALGOMA INC. USA
Applicants
Lou Brzezinski and Alexandra Teodorescu, for the moving party United Steelworkers Union Local 2251
Ashley John Taylor and Lee Nicholson, for the Applicants
David Rosenblat, for Deutsche Bank, the DIP Lenders and the Term Lenders
Clifton P. Prophet, for the Monitor, Ernst & Young Inc.
Massimo Starnino and Debra McKenna, for the United Steelworkers Union Local 2724
Heard: April 13, 2016
Gillese J.A.:
[1] This is a motion brought by Local 2251 of the United Steelworkers Union for the stay of an order made in a CCAA proceeding.
[2] Local 2251 is the exclusive bargaining agent for the hourly employees of Essar Steel Algoma Inc. (“Algoma”) in Sault Ste. Marie. It moves to stay the order of Newbould J. (the “CCAA judge”) dated March 14, 2016 (the “Order”), pending the disposition of its motion for leave to appeal that Order. The Order establishes a summary process with condensed timelines for the resolution of grievance related claims.
[3] In Local 2251’s amended Notice of Motion for Leave to Appeal, dated March 29, 2016, it contends that leave should be granted because its proposed appeal raises points of significance to the practice, including whether the suspension of grievances under the CCAA constitutes an alteration of the collective agreement, contrary to s. 33 of the CCAA.
[4] For the reasons that follow, the motion for a stay is dismissed.
BACKGROUND IN BRIEF
The CCAA Proceeding
[5] Algoma and certain related companies (the “Applicants”) came under the protection of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (“CCAA”) by court order made in November of 2015 (the “Initial Order”).
[6] The Applicants are currently in the middle of a sale and investment solicitation process (“SISP”) which was approved by an order dated February 10, 2016. The SISP is expected to be completed by August 31, 2016, which coincides with the expiry of the Applicants’ debtor-in-possession financing (“DIP financing”).
[7] The majority of the Applicants’ employees are represented by Locals 2251 and 2724 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Services Workers International Union (“USW”).
[8] Local 2251 is the exclusive bargaining agent for all hourly employees of Algoma in Sault Ste. Marie. It represents approximately 2235 members.
[9] The relationship between Algoma and Local 2251 is governed by a collective agreement, dated August 1, 2013 (the “Collective Agreement”). Article 13 of the Collective Agreement establishes a three-step process for the resolution of grievances and provides for the final and binding settlement of grievances by arbitration in the third step. Most of the pre-filing grievances have gone through the first two steps and what remains is arbitration under the third step.
[10] Currently, there are approximately 3,000 unresolved grievances of employees represented by Local 2251. The grievances date back as far as 2005.
[11] Local 2724 is the exclusive bargaining agent for all of Algoma’s salaried employees.
[12] By order dated January 14, 2016, a general claims process was approved to determine claims against the Applicants and their directors and officers (the “Claims Procedure Order”). However, the USW and the Locals requested that an independent claims procedure be designed specifically to deal with grievances. The Applicants agreed to such an approach on the understanding that the parties would work together to develop a grievance claims procedure.
[13] Algoma, the USW and Local 2724 negotiated such a procedure. Local 2251 did not participate because it viewed such a procedure as an amendment or alteration of the collective agreement, contrary to s. 33 of the CCAA.
The Order
[14] The motion to obtain court approval of the grievance claims procedure was heard on March 11, 2016. The motion was granted and the Order made on March 14, 2016.
[15] The Order provides for a streamlined grievance claim procedure. The goal is to have such claims determined by August 31, 2016, which coincides with the conclusion of the SISP and expiry of DIP financing.
[16] The Order requires Local 2251 to prepare a list of grievances by April 11, 2016, to which the Applicants must respond by May 2, 2016. The list is to include the identity of the employee, a 250-word summary of the grievance, and the relief or remedy sought. All claims not included on the list are deemed withdrawn with prejudice, and are forever barred and extinguished.
[17] The Order appointed the Honourable John Murray, as Chief Arbitrator, to oversee the implementation of the procedure. Chief Arbitrator Murray has the power to assign grievance claims to qualified labour arbitrators to assist the parties in resolving the claims. Once a grievance arbitrator has carriage of a grievance claim, he or she must attempt to come up with a consensual resolution but, if unsuccessful, the arbitrator will hear, adjudicate and determine the grievance claim. Except for a limited number of identified grievances, the result will be final but have no precedential binding effect.
Steps Taken since the Order Issued
[18] Acting pursuant to the Order, Chief Arbitrator Murray named Michael Mitchell as Deputy Chief Arbitrator. The two men have already travelled to Sault Ste. Marie for both joint and separate meetings with representatives of Algoma, Local 2251 and Local 2724.
[19] At the direction of Chief Arbitrator Murray, after the meetings, Algoma delivered to Local 2251 a summary of its information on the number of grievances associated with each article in the collective agreement.
[20] Based on the spreadsheet of grievances provided by Algoma, Chief Arbitrator Murray noted that many grievances appear to raise common issues, the resolution of which could clear the path to speedy resolution of the underlying grievances.
[21] The parties subsequently met with the Deputy Chief Arbitrator to discuss progress in identifying those common grievances that could potentially be resolved together. After one day with the Deputy Chief Arbitrator, Local 2251 requested an adjournment of the meeting. There is some dispute about what next occurred. On one version, Local 2251 agreed to the continuation of the meeting without it being present. On the other version, Deputy Chief Arbitrator refused to adjourn the meeting, Local 2251 walked out of the meeting and refused to re-attend. There is no question, however, that the meeting continued without Local 2251’s participation.
[22] In a report delivered to the parties on April 4, 2016, Deputy Chief Arbitrator Mitchell reiterated that the Chief Arbitrator and Deputy Chief Arbitrator have directed a modified approach to the grievance claims procedure that is less onerous than that which is provided for in the Order. Among other things, the modified approach does not require Local 2251 to provide a 250-word summary of each grievance in the list that it is to prepare.
[23] A number of executive members of Local 2251 are working full-time to complete the list but, consequently, are unable to perform other day-to-day tasks critical to the operation of the union.
[24] Algoma has agreed to allow Local 2251 to pull four workers from the shop floor to assist in drafting the list.
[25] As of April 6, 2016, 36 of 48 grievances filed by Local 2724 and its members have been consensually resolved under the grievance claims procedure provided for in the Order. It is expected that the remaining grievances will be resolved well before August 31, 2016.
The Notice of Motion for Leave to Appeal
[26] On March 29, 2016, Local 2251 served its notice of motion for leave to appeal the Order. An amended notice was filed on April 1, 2016.
THE TEST FOR GRANTING A STAY
[27] To obtain a stay, it is trite law that the moving party must demonstrate that:
there is a serious question to be determined on the appeal, should leave be granted;
it will suffer irreparable harm if the stay is not granted; and
the balance of convenience favours granting the stay.
See RJR MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311.
[28] In applying this test, the overall focus must be on whether a stay is “in the interests of justice”: Circuit World Corp. v. Lesperance (1997), 1997 1385 (ON CA), 33 O.R. (3d) 674 (C.A.), at p. 677.
1. Serious Question
[29] The threshold to satisfy the first limb of the test is generally low, in that the court is required to make a preliminary assessment of the merits to determine that the appeal is neither frivolous nor vexatious: RJR MacDonald, at pp. 337-338.
[30] However, where – as in the present case – leave to appeal is required, the moving party must demonstrate that there is at least a “reasonable prospect” that leave will be granted: Vandenberg v. Desjardine, 2016 ONSC 1968, at para. 14.
[31] Moreover, leave to appeal is to be granted only sparingly in CCAA proceedings and only where there are serious and arguable grounds: Return on Innovation Capital Ltd. v. Gandi Innovations Limited, 2012 ONCA 10, 90 C.B.R. (5th) 141, at para. 6. At para. 6 of Innovation Capital, this court states that in determining whether the grounds of the proposed appeal are sufficient and arguable, it considers whether:
the point on the proposed appeal is of significance to the practice;
the point is of significance to the action;
the appeal is prima facie meritorious or frivolous; and
the appeal would unduly hinder the progress of the action.
[32] This stringent test for granting leave to appeal in CCAA proceedings is a result of the real time dynamic of CCAA matters and Parliament’s clear intention to restrict appeal rights, having due regard to the nature and object of CCAA proceedings: Newfoundland and Labrador v. AbitibiBowater Inc., 2010 QCCA 965, 68 C.B.R. (5th) 57, at para. 26, aff’d 2012 SCC 67.
[33] In my view, Local 2251 has not met its burden on this first part of the RJR MacDonald test. It appears unlikely that leave will be granted. The grounds set out in the amended Notice of Motion raise well-settled points of law. The federal paramountcy of CCAA proceedings has been the subject-matter of much appellate jurisprudence, including that of the Supreme Court of Canada. And, it is well-settled that grievances are caught by the stay made in CCAA proceedings, and that the CCAA judge has the power to establish a procedure for resolving matters which parties had previously agreed to have resolved by arbitration, including arbitrations pursuant to the terms of a collective agreement: Canwest Global Communications Corp., 2011 ONSC 2215, 75 C.B.R. (5th) 156, at paras. 28-29.
[34] Furthermore, it appears clear that an appeal would unduly hinder progress in this CCAA proceeding. On the findings of the CCAA judge, there is “no question” that the grievance claims procedure will assist the Applicants in their restructuring attempts, that “some certainty” regarding the potential impact of the unresolved grievances “would greatly assist matters”, and that a third party considering an offer to purchase would “obviously” want to understand the impact of the grievances on the business (para. 9). A stay at this point would delay the resolution of the grievances. So, too, would granting leave to appeal.
2. Irreparable Harm
[35] Local 2251 submits that it will suffer irreparable harm unless a stay is granted, primarily because:
a. it does not have the human resources or capability to process and summarise the outstanding grievances by the deadline, with the result that the unprocessed grievances will be barred and extinguished;
b. the grievances cannot be addressed properly under the procedures provided for in the Order, given the compressed time period in which the grievances will be determined;
c. it cannot carry out its duty of fair representation because of the constraints imposed by the Order; and
d. it cannot fully or properly be involved in the SISP process because the Order requires that Local 2251 put its full efforts into the grievance process.
[36] Much of Local 2251’s assertion of irreparable harm rests on the workload created by the Order, its tight timelines and Local 2251’s resulting inability to fulfill its other obligations, including involvement in the SISP process.
[37] I find it difficult to accept this assertion because it appears that there were (and are) avenues available to Local 2251 to ameliorate the workload and strict deadlines which Local 2251 has failed to pursue. I offer three examples of this.
[38] First, before making the Order, the CCAA judge pressed Local 2251 to identify its concerns with the procedure. While Local 2251 mentioned a concern about the deadlines imposed under the grievance list procedure, it does not appear that this matter was pursued in any detail before the CCAA judge nor has Local 2251 moved before that judge to amend or vary the Order to extend the deadlines.
[39] Second, it appears that the Applicants have been working in good faith to assist Local 2251 in preparing the list by the deadline. It has released four Local 2251 members from their duties at Algoma to work full time on the grievance claims procedure. It has provided Local 2251 with a summary detailing the number of grievances associated with each article in the collective agreement. It has provided Local 2251 with a list of outstanding grievances and the description of each grievance that was provided by Local 2251 when the grievance was filed. And, it offered to consent to the deadline being extended to April 20, 2016.
[40] Third, the Chief Arbitrator and Deputy Chief Arbitrator appear to be very cognizant of the difficult challenges the Order poses for Local 2251 and are willing to assist in the resolution of those challenges. Earlier in these reasons I give examples of assistance that the Chief Arbitrator and the Deputy Chief Arbitrator have already provided.
[41] However, it appears that Local 2251 has not fully explored that route of assistance. A recent example of this can be seen in Exhibit “C” to the affidavit of Alexandra Teodorescu sworn April 12, 2016. Exhibit “C is an email sent by Chief Arbitrator Murray in which he says that he will treat an agreement by the parties to extend the April 11 deadline to April 15 (made in the context of an earlier adjournment of this motion), as a “joint request by the parties”. Chief Arbitrator Murray goes on to ask that, in future, such matters as extensions be the subject of a discussion with him in advance. He gives concrete reasons for this request, noting that the parties need to work diligently together and in good faith to achieve the important goals of the grievance claims procedure.
[42] From this and the assistance already provided by the Chief Arbitrator, there is a demonstrated willingness on his part to work collaboratively to resolve the inevitable strains and workload problems that arise in a situation such as this.
[43] I find it also difficult to accept the submission that irreparable harm will ensue if individual grievances are forever barred as a result of the grievance failing to be on the list.
[44] In this regard, I note two things. First, the alleged harm appears speculative. Local 2251 has lists. Algoma has lists. Steps have been taken to publish the list, which employees are urged to review to ensure that their grievances are listed. Second, if leave to appeal is granted and the appeal is allowed, anything that was done pursuant to the terms of the Order, including the possible barring of grievances, will be overturned.
[45] Thus, I find it difficult to accept that irreparable harm will flow if the stay is not granted. Having said that, I wish to be clear. I fully accept that the Order has placed an onerous task on Local 2251, including the executive members who are working extremely hard to meet the deadlines. There is no question that the workload and resulting stress and strain is real and creates problems for the full and proper discharge of all of the union obligations. That said, I do not see such problems as amounting to irreparable harm, within the legal meaning of those words.
4. Balance of Convenience
[46] In considering the third part of the test, the court must determine which of the two parties will suffer the greater harm from granting or refusing the stay: RJR MacDonald, at p. 342.
[47] Local 2251 says that there is no evidence that the continued existence of the grievances has had, or will have, any impact on the SISP or that any bidder or person involved in the sales process has indicated that the grievances of Local 2251 have impeded or affected any potential bid. In the face of the irreparable harm it says that it will suffer if the stay is not granted, its position is that the balance of convenience weighs in favour of granting the stay.
[48] The Applicants submit that the CCAA judge was in the best position to consider and balance the interests of the various stakeholders with respect to the Order and his determination should not be disturbed.
[49] I accept the Applicants’ submission on this matter.
[50] The CCAA judge found that the Order would assist the Applicants in their restructuring attempts and that, in order to achieve a going concern solution, some certainty regarding the potential impact of the unresolved grievances would greatly assist (para. 9). He further found that it would be very detrimental to the attempted restructuring if the stay of the grievance claims and a process for their speedy resolution were not ordered (para. 35).
[51] Based on the findings of the CCAA judge, I am of the view that granting the stay motion would lead to greater harm to the Applicants and other stakeholders in the CCAA proceeding, including Local 2251, as the stay would delay the determination of the grievance claims. The balance of convenience weighs heavily in favour of the Applicants.
CONCLUSION
[52] In my view, granting a stay is not in the interests of justice. There can be little doubt that resolution of the outstanding grievances is important to the Applicants’ restructuring efforts. As the CCAA judge found, the Applicants must implement a plan of arrangement or a sale by August 31, 2016 (or September 30, 2016, at the very latest). He also found that the Order would greatly assist in bringing certainty to the claims against the Applicants that may impact a restructuring transaction. Granting a stay pending leave to appeal, in these circumstances, will virtually ensure that the outstanding grievance claims will not be fully addressed by August 31, 2016.
DISPOSITION
[53] Accordingly, the motion is dismissed.
Released: April 15, 2016 (“E.E.G.”)
“E.E. Gillese J.A.”